The Government Patent Market for Public Health Inventions, 4

Posted on September 29, 2017 by Gerald Barnett

The NIH’s Institutional Patent Agreement program, then, (i) ignores the distinction in the Kennedy patent policy between inventions made in research directly concerned with public health and inventions made in other research, (ii) expressly authorizes contractors to grant exclusive licenses, (iii) removes the time constraint on contractors to grant such licenses or otherwise use an invention, and (iv) creates the prospect that an exclusive license may run for the life of the patent. Under the Kennedy patent policy, federal agencies were to take ownership of inventions made in research directly concerned with public health and dedicate these inventions to the public domain or, if patented, to license them non-exclusively (if not royalty free) in the United States. Why does this matter? The march-in in the Kennedy patent policy concerns inventions that the policy directs federal agencies to allow to remain with the contractor (provided, of course, the contractor obtains ownership). It’s the contractor’s behavior in the private market that might warrant march-in–and that behavior is not the same scope of behavior that antitrust law applies to.

Kennedy policy march-in has to do with a failure to bring an invention to “the point of practical application” or to license the invention on reasonable terms. These are not, of themselves, antitrust matters. There is no working requirement in federal patent law. A patent owner can sit on an invention and never use it or license it to others to use. The Kennedy patent policy, however, creates a working requirement in the private market–the contractor must develop the invention or make it available to others. If not, then the government has the right to require the contractor to do so–it would not be a “taking” of a private right, it would be a right negotiated for in awarding a federal contract. Thus, what’s now 28 USC 1498 would not matter–the contractor would have no claim on compensation.

The march-in in the Kennedy patent policy has to do with the contractor’s behavior in the private patent marketplace. The government has its royalty-free license to practice and have practiced–to make, use, and sell and authorize others to do so. Thus, in the government patent market, there is no need for march-in. A contractor has already, as a condition of the federal funding, conceded the government patent market to the government.

Now, perhaps, you begin to see the sleight of hand in Bayh-Dole. Continue reading →

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The Government Patent Market for Public Health Inventions, 3

Posted on September 28, 2017 by Gerald Barnett

The NIH’s Institutional Patent Agreement program was framed in terms of the Kennedy patent policy. It ignored, however, the Kennedy patent policy distinction between discoveries directly related to public health and other discoveries. It could do so because it set up a primary pathway for management of inventions by a nonprofit that has hosted federally funded research. In this primary pathway, a nonprofit will obtain a patent on each discovery that it chooses to manage and make the invention available non-exclusively, royalty free or on terms that are reasonable in the circumstances. Here’s the template IPA, section VI.(c).

The Grantee shall administer those subject inventions to which it elects to retain title in the public interest and shall, except as provided in paragraph (d) below, make them available through licensing on a nonexclusive, royalty-free or reasonable royalty basis to qualified applicants.

The nonprofit “Grantee” is to manage inventions “in the public interest”–not in its own interest. This is the same mandate that federal agencies had under the Kennedy patent policy, except that under the IPA program, the nonprofit had to seek a patent and could not simply publish the invention. The argument made for the IPA program was that nonprofit patent administrators, located closer to the inventors than were federal administrators, and with greater incentives to promote inventions for public use than had federal administrators, could do a much better job than the federal government in promoting the development of inventions for public use and benefit. The nonprofits, the argument went, would do the job the federal agencies were committed to do, but would do that job better than the federal agencies could. Continue reading →

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The Government Patent Market for Public Health Inventions, 2

Posted on September 27, 2017 by Gerald Barnett

There is another way, however, in addition to march-in, for the government to influence the commercial exploitation of health-related inventions made with federal support. Bayh-Dole has a clever design, but the people who drafted it made their mistakes.

March-in has to do with problems in the private market, where a patent owner has conditional exclusive rights. Let’s return to the government market again, because there the government has complete freedom to use and authorize the use of any subject invention, as provided by the Bayh-Dole-required non-exclusive license.

Let’s frame the government market this way: if the government has a purpose in providing for health care for its citizens, then there is a government market for the provision of government health care services. Vannevar Bush’s Science the Endless Frontier is focused on how the approach to technology innovation used during World War 2 could be adapted for civilian use. President Roosevelt requested, in particular, that Bush address innovation in medicine.

With particular reference to the war of science against disease, what can be done now to organize a program for continuing in the future the work which has been done in medicine and related sciences?

The scientific frontier, argued Bush, would open up new understanding and technology that could then be applied to medicine. Continue reading →

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The Government Patent Market for Public Health Inventions, 1

Posted on September 26, 2017 by Gerald Barnett

Let’s look at two things–Bayh-Dole’s standard patent right clause license to the government and 28 USC 1498. First, 28 USC 1498:

Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.

That’s the first part of section (a). Basically, if the United States uses or authorizes the use of an invention that’s the subject of a patent issued by the United States, then the patent owner can recover “reasonable and entire compensation” for the government’s use. That is, the patent owner doesn’t sue for infringement, but rather makes a claim in the Court of Federal Claims.

So far, so good. Now let’s look at Bayh-Dole’s government license, at 37 CFR 401.14(a)(b):

With respect to any subject invention in which the Contractor retains title, the Federal government shall have a nonexclusive, nontransferable, irrevocable, paid-up license to practice or have practiced for or on behalf of the United States the subject invention throughout the world.

As a condition of the federal funding, the contractor must grant to the the government a royalty-free license. It’s important that this is a license–it is not a taking of private property by the government; rather, it is an exchange, and if a contractor is not willing to grant the license, then the contractor cannot receive the federal support. Since the license is not a taking, it is not subject to a claim for compensation. Continue reading →

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Bayh-Dole the Monster

Posted on September 25, 2017 by Gerald Barnett

The Bayh-Dole Act makes a great deal about public interest. Throughout the law are gestures toward worthy objectives–use of inventions, manufacturing in the United States, government licenses, and the right of federal agencies to step if they need to. But all of this is for show. None of it operates. Bayh-Dole can be reduced to two propositions:

  1. Federal agencies must use by default a standard patent rights clause that forbids them from having an ownership interest in inventions made with federal support if the contractor obtains an ownership interest unless the contractor subsequently waives that interest or fails to maintain that interest.
  2. Federal agencies, when they acquire inventions, may license those inventions exclusively.

Everything else in the law is for show and otherwise inoperative, ineffective, unimplemented, unpracticed, prohibitively difficult, or designed not to work. Utter waste. Think about it. Continue reading →

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The laboratory and discovery

Posted on September 22, 2017 by Gerald Barnett

It’s a nice thought that faculty and students make their discoveries “in the lab” as a recent APLU infographic depicts.

There certainly are discoveries made in laboratory work. But discoveries are also made out collecting samples, and in work shops, and at computer workstations, and–this really eats at university administrators–not anywhere near university-controlled facilities. Discovery can arise in, say, conversation, or listening to a talk at a conference:

Here, for instance, is an account of Boyer and Cohen meeting up (from Sally Smith Hughes, Genentech: The Beginnings of Biotech):

In November Cohen and Boyer arrived in Honolulu for the conference, neither knowing the details of the other’s research. As it came time for Boyer to present, Cohen listened raptly to his description of EcoRI’s properties. His mid lit up when he heard that the enzyme cut DNA molecules predictably and reproducibly into unique fragments with sticky ends. IN a flash of insight, he wondered: could one use Boyer’s enzyme to sever a plasmid precisely and use the sticky ends to attach a second DNA fragment?

In other words, the groundbreaking discovery came at a conference. The lab work set up the discovery, but the discovery that was groundbreaking wasn’t in a lab, and wasn’t even the subject of the research that was going on in the labs.

Imagine if university administrators had gotten to Cohen and Boyer first, before they had met–they may well have filed patents on the stuff in the labs, and it may have been impossible to coordinate the licensing of those patents.

In a way, it is a fairy tale that research discoveries take place “in the lab.” The lab is a place someone goes to test something. The discovery is often the reason someone goes to a lab, not the thing that someone comes back out of the lab with. Continue reading →

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Fenn and Shaw

Posted on September 21, 2017 by Gerald Barnett

Here are two court decisions at cross-purposes. In 1997, Shaw v The Regents of the University of California held that a patent agreement should be interpreted using common law of contracts and rejected the Regents contention that its patent policy was an administrative matter subject to its discretion to change and enforce at will.

We find no merit in the University’s suggestion that, as a public employee who is employed pursuant to statute, not contract, Shaw has no vested contractual right in his terms of employment, such terms being subject to change by the University.

When a public employer chooses instead to enter into a written contract with its employee (assuming the contract is not contrary to public policy), it cannot later deny the employee the means to enforce that agreement.

We also reject the University’s argument that the Patent Policy is a mere personnel policy which it may modify unilaterally. Although the University is entitled to revise its Patent Policy, it cannot do so with respect to Shaw because of its written agreement with him.

In 2003, in Fenn v. Yale, the court held that a patent policy could be changed at will by the university, and provided that an employee did not object to the changes, the changed policy would then apply (brackets in original): Continue reading →

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The Key Provisions of Bayh-Dole

Posted on September 20, 2017 by Gerald Barnett

Now, with all that fusstation from the University of Pittsburgh out of the way, we might ask then what are the “key provisions” of Bayh-Dole that a university should make faculty and the public aware of.

Only One Key Provision

For universities, there is only one key provision in Bayh-Dole that actually matters. Everything else is contingent on discretionary actions. Here it is (35 USC 202(c)(1)):

That the contractor disclose each subject invention to the Federal agency within a reasonable time after it becomes known to contractor personnel responsible for the administration of patent matters, and that the Federal Government may receive title to any subject invention not disclosed to it within such time.

That’s a requirement on federal agencies regarding what the agencies must put in the standard patent rights clause. Here’s the version in the standard patent rights clause, then (37 CFR 401.14(a)(c)(1)):

(1) The contractor will disclose each subject invention to the Federal Agency within two months after the inventor discloses it in writing to contractor personnel responsible for patent matters.

When a university becomes a party to a federal funding agreement, this is the key provision. If you think that 35 USC 202(a) is the key provision–the right of small business and nonprofit contractors to elect to retain title–look again–that right is expressly contingent on proper disclosure.

There’s a bunch more administrative hoo-haw, of course about the level of detail required for proper disclosure, and that the  disclosure report has to be written, and identify the funding agreement, and has to identify any statutory bars, especially publications: Continue reading →

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The University of Pittsburgh’s Fake News Summary of Bayh-Dole, 4

Posted on September 19, 2017 by Gerald Barnett

We are working through the University of Pittsburgh summary of the Bayh-Dole Act, and I at least am getting increasingly grouchy as I do. How can someone writing for university faculty “innovators” get things so wrong in some many places? That’s more of a rhetorical question than a metaphysical one, of course.

  • The University must provide the U.S. government with a nontransferable, irrevocable, paid-up, nonexclusive license (“confirmatory license”) to use the invention.

The “confirmatory license” is not in Bayh-Dole, and there’s a “throughout the world” left out, but no matter. The license required is “to practice and have practiced” not merely to “use” an invention. In the history of federal invention regulations, “practice” means “to make, use, and sell” and “have practiced” means “to have made, have used, and have sold.” That’s way, way broader than to “use” an invention. The license does not exist until it has been granted. The paper copy may confirm something–but what it confirms is compliance with the patent rights clause, not something that the government already has in the absence of anyone at Pittsburgh getting around to granting the government its license.

  • In granting a license to use the invention, the University also generally must give priority to small businesses, while maintaining the fair-market value of the invention.

This is nonsense! There’s nothing whatsoever in Bayh-Dole about maintaining the “fair-market value” of an invention. As Captain Haddock would say, “Billions of blistering blue barnacles!” Here’s what Bayh-Dole requires to be in the standard patent rights clause: Continue reading →

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The University of Pittsburgh’s Fake News Summary of Bayh-Dole, 3

Posted on September 18, 2017 by Gerald Barnett

We are working through the fake history published by the University of Pittsburgh regarding the Bayh-Dole Act and its “key provisions.” “Fake” is too light a word for it, but it’s trendy and so people get the general idea. Really, what’s going on is material misrepresentation of federal law and regulations in a decades-old institutionally self-serving scheme to defraud inventors of the rights to their inventions. All this is put forward as virtuous, endorsed by law, and wildly successful. What better cover for intellectual fraud. No wonder university technology transfer is so complicated–it is built, in most places, on a lie.

The act ultimately has motivated more and more universities to become actively involved in the transfer of technology from the lab to market.

As David Mowrey has demonstrated, universities were active before Bayh-Dole. Many were involved in the IPA program up to its end in 1978. What Bayh-Dole has done is two-fold. First, it has induced (in a misrepresented form) many more university administrations to take patent management in-house. A few universities had done so before Bayh-Dole–notably, University of California, MIT, and Stanford. After Bayh-Dole, however, many more universities did so. Why? For one, Bayh-Dole was misrepresented as requiring university ownership. Second, Bayh-Dole was used to create the impression that the goal of federal research was commercialization rather than public benefit arising from the use of inventions. Bayh-Dole does not require commercialization, but it is drafted so badly that it is easy to deceive the casual reader. And since most university administrators and faculty don’t read the law or the implementing regulations, it’s just too easy to fool them.

The ability of universities, including the University of Pittsburgh, to retain title to and actively license these technologies serves as a tremendous incentive.

“Retain title” here is used without critical context. Here by way of contrast is an accurate statement, if long-winded, to make things clear what the University of Pittsburgh should mean by “retain title”:

The ability of university administrators on behalf of the university to retain title to inventions made with federal support,

when the administrators have previously acquired title to those inventions outside of anything in Bayh-Dole,

relative to any request for title to those inventions by the federal government, and

thus feel free from any government intervention,

to then to attempt to license patents based on these inventions

serves as a tremendous incentive to operate an invention management office as an internal university program.

No doubt a better choice of sentence structure would provide clarity, though clarity is not necessarily an administrative priority. There’s no doubt that having a blank check from the government to keep any federally funded inventions university administrators acquire might serve as a “tremendous incentive.” It’s just that Bayh-Dole doesn’t provide that blank check.  Continue reading →

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